NEW DELHI: From what seems to be the most eventful week over the past year, India Inc. and the markets in general have got all that they have wished for. BSESensex recorded its best single-day gain this year and rose to a 14-month high since it closed at 18,518.22 on July 26, 2011.

Post the European Central Bank (ECB) liquidity boost in the previous week, the US Fed on Thursday declared that it would be buying mortgage backed securities (MBS) worth $40 billion each month to revive the jobs market in the world's largest economy.

The announcement and the intent from the US Federal Reserve was enough to infuse significant liquidity into global markets, from a trading perspective.

On the domestic front, a diesel price hike and revision of subsidy with regards to LPG were followed up with FDI in aviation, multi brand retail and a few other segments. The bulls could not have asked for more.

All bearish arguments about policy paralysis and lack of decision making should now ideally be put to rest, at least in the near term.

In the coming week, RBI Governor D Subbarao will be under tremendous pressure to cut rates or at least reduce cash reserve ratio ( CRR). The RBI has been asking for fiscal policy action from the government since the beginning of 2012, and now that the government has delivered, markets expect RBI to temporarily divert the attention from inflation to growth.

If this indeed does happen, it will be another reason to cheer for the bulls. However, considering that quantitative easing has already been done by the US Fed and that fuel prices have been raised in excess of 10 per cent, the RBI is likely to find itself in between a rock and a hard place.

Fund managers, will now argue that Quantitative Easing by the Fed is actually negative for India and that a rise in commodity prices, especially crude oil will cause more pain over the longer term.

However, one must remember that when it comes to the short term, it is usually liquidity and sentiment that drives the markets rather than the underlying fundamentals. History tells us and as quoted in the Forbes magazine, 'Markets can remain irrational a lot longer than you and I can remain solvent'.

Thus from a trading perspective, I would suggest that one should stay bullish and make hay while the sun shines.

We are bullish and expect 5800 on the Nifty. Higher levels, on the back of enhanced liquidity and increase in the 'risk on' sentiment in equities, cannot be ruled out.

Technically speaking, the markets are now just about half a per cent away from what would be a 'higher top higher bottom structure' on the monthly chart. This, coupled with a rising value of the ADX (14) indicator on the daily charts and a weekly higher top higher bottom structure, indicates that going forward a trader should use every decline to buy into the equity market.

Rupee appreciated significantly in Friday's session and by using Harmonic trading patterns and simple Fibonacci retracement levels, we expect it may soon be paying Rs.52 for a dollar

That would significantly augment bullish sentiment in markets.

While we expect the Nifty to rally to 5,750 to 5,800 levels in the near term, charts of individual stocks in the Nifty and those of the mid and small cap indices on the BSE suggest that this liquidity fuelled rally is most likely to be extremely stock specific.

We remain positive on stocks like SBI and L&T as mentioned in last week's column. In addition, ICICI Bank and Mahindra and Mahindra Ltd are also expected to give strong upsides of around 6-8 per cent from current levels.

In the midcap space, a 10-12 per cent upside is expected from current levels and in Godrej Industries and Voltas and both should be purchased on every decline. The stop loss for the trade would be at Rs 254 and Rs 111, for Godrej and Voltas respectively.

(The views and recommendations expressed in this section are the analyst's own and do not represent those of EconomicTimes.com)